(Reuters) - American International Group (AIG.N), is prepared to ask the U.S. Federal Reserve to relax rules on its $60 billion-plus disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times said.

AIG was looking at installment payments and other flexible options to make it easier for potential buyers to bid for assets and increase its chances of surviving as an independent company, the paper said, citing people close to the situation.

The moves, being considered by AIG's management, are aimed at boosting competition for the disposals and countering the perception that the company will be forced to sell units at bargain prices to repay the government aid, the paper said.

AIG has several planned asset sales to raise funds to repay a $150 billion U.S. government bailout.

Under the current deal with the Fed, AIG can sell assets only to bidders paying at least 90 per cent of the price in cash, the paper said.

This provision is designed to ensure that AIG has enough cash to pay both the interest and the principal on a five-year $60 billion government loan as well as $4 billion a year in interest on $40 billion of preferred shares owned by the authorities, according to the paper.

AIG is anxious not to close doors to potential buyers at a time when cash is at a premium and swathes of the capital markets are frozen, the paper said.

The paper reported that no discussion on this issue had yet taken place with the Fed but added that, as AIG's disposals program continued, the company would entertain bids in cash and shares and take them to regulators for approval.

AIG could not be reached immediately for comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by David Cowell)
http://www.reuters.com/article/ousiv/idUSTRE4BU17S20081231